Economic slowdown projected

SHARE | Sunday, 08 March 2015 | By Kabelo Adamson

The local economy is forecast to grow at a slower pace of 4.9 percent in 2015, compared to last year’s 5.2 percent, Bank of Botswana governor, Linah Mohohlo has said.Mohohlo was speaking on Tuesday when launching the 2015 Monetary Policy Statement. She however says the results of the Business Expectations Survey carried out by the central bank in September last year shows some moderately better economic prospects for this year. “As indicated in the budgetary outlays for the 2015/16 fiscal year, overall demand should be invigorated by higher government expenditure. But power and water supply constraints, as well as the dry spell in some parts of the country could dampen domestic economic activity,” Mohohlo said.The 2015 Monetary Policy statement predicts that the global output growth is forecast at 3.5 percent in 2015, slightly higher than the estimated 3.3 percent for 2014. The projected increase in the global economic activity in 2015 is predicted on some pick-up in advanced economies, led by the USA. A moderate growth is expected from emerging markets economies. Mohohlo said the message contained in this year’s statement is that favourable external and domestic trends, together with the bank’s monetary policy actions undertaken in 2014, kept inflation within the bank’s medium term objective range of 3-6 percent for an unprecedented twenty consecutive months. “Indeed, for much of 2014, headline inflation was close to the bottom end of the range and expectations are that this will be the case, at least in the short to medium term,” the governor said.Inflation in Botswana was at 3.8 percent in December 2014 compared to 4.1 registered in the previous period. Mohohlo explained that the downward trend in global inflation, mainly in Botswana’s trading partner countries, spilled over to domestic price trends. “The benign trend in domestic inflation benefited from the reduction in the price of fuel; there were also a dissipation of the previous year’s increase in the alcohol levy and the lower rate of adjustments in some administered prices, both of which had a favourable impact on price developments,” she said. In addition she says the pace of price increases was also the result of subdued domestic demand pressures, despite higher government spending. Overall, Mohohlo said it is forecast that domestic demand pressures on inflation will be modest this year. “As indicated in the 2015 budget speech, any increase in civil service is unlikely to generate significant demand or expectations of higher inflation,” she said.It is projected that inflation will remain within the 3-6 percent range in the medium term. Mohohlo said the only limitation to this prognosis would be any substantial upward adjustment in administered prices and government levies beyond current projections.